Spain's economic anguish has had a number of repercussions for the country's telcos, with stable or declining revenue causing much nervousness as operators struggle to fund essential investment in spectrum and both fixed-line and mobile networks. Earlier this year Vodafone felt the pinch, announcing plans to cut its Spanish workforce by up to 1,000. Though general economic conditions have not helped, the move partly resulted from its own decisions. The company saw revenue drop for several quarters and so decided to save money by cutting handset subsidies. The ploy backfired: by the end of 2012 the company had lost 2.29 million mobile subscribers in the year, and as a result revenue dropped from £5 billion to £4.2 billion.

Yet Vodafone is one of the key players in Spain's surging fibre market, where investment in networks is a precondition of customer growth and financial reward. In common with development elsewhere (not least in the mobile sector), Vodafone is not going it alone, but is sharing the cost with other parties. In Spain, it has partnered with Orange. Unlike many other European markets, where operators have tended to concentrate on high-density towns (Paris, Milan, Amsterdam), in Spain FttH is more widely available in smaller towns and rural areas, often guided by the policies of regional governments. In this market there is plenty of room for smaller players to co-exist with the incumbent.

Orange launched an FttH pilot in Madrid as early as 2010, and earlier this year teamed up with Vodafone to invest up to €1 billion on a joint fibre network covering 50 of the largest cities. With complementary footprints, the fibre is owned independently though the companies share technical specifications to ensure compatibility as a single network. Each operator provides access to its own footprint, making the entire network available to each other. Orange recently switched on its fibre for commercial services, initially in Madrid, and planned to have some 800,000 premises connected to the network by March 2014, rising to three million by September 2015 and six million by 2017. In Madrid alone, up to 40,000 homes could be connected to the network.

The Orange/Vodafone joint network is open to co-investing third parties to share, which could dramatically extend the availability of fibre to Catalonia and Asturias where there are already extensive deployments through existing projects.

These developments are encouraging, and show that telcos operating through long-term economic doldrums are reassured that sensible investment strategies will provide dividends down the track.

By Henry Lancaster, Senior Analysts at Paul Budde Communication Henry is also a contributor of the Paul Budde Communication blog located here. Visit Page

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